The US flood insurance market has grown 24% between 2016 and 2022, from $3.29 billion in direct premiums written to $4.09 billion, and it is against this background that private flood insurers are seizing opportunities to grow their market share, according to Triple-I
This coincides with the federally backed National Flood Insurance Program’s (NFIP) new pricing methodology that is generating premium increases for many of its policyholders.
“The timing of the private market’s increasing appetite for flood risk is fortuitous, as it coincides with Risk Rating 2.0, NFIP’s new pricing methodology that aims to make the government agency’s flood insurance premium rates more actuarially sound and equitable by better aligning them with individual properties’ flood risk,” the Insurance Information Institute noted.
Adding: “As NFIP rates become more aligned with principles of risk-based pricing, some policyholders’ prices are expected to fall, while many are going to rise.”
It is reasonable to expect that, as the cost of participating in the government-run flood insurance program rises for some, the institute stated, private insurers will recognize the market opportunity and respond by applying cutting-edge data and analytics capabilities.
As well as more refined pricing techniques, and new products, such as parametric insurance, to seize those opportunities. It also is incumbent upon communities to explore innovative approaches like community-based disaster insurance programs, analysts noted.
Triple-I said: “Increasing private-sector competition can only increase the opportunities to obtain affordable coverage. Unfortunately, as risk-management firm Milliman points out, ‘A relative lack of consumer demand compared to other property insurance offerings still gives carriers hesitation when trying to evaluate whether they should invest in launching their own private flood programs.’”
The latest, is supported by recent consumer research conducted by Triple-I, in partnership with reinsurer Munich Re.
According to the institute’s survey, 64% of homeowners and renters surveyed responded that their residences were not at risk from flood, and another 14% were unsure of their flood risk.
Proportionally few homeowners buy flood insurance unless their mortgage lender requires it, in addition, surveys have shown that many people incorrectly believe their standard homeowners policies cover flood damage.
